GM (aka General Motors) made a big splash a few days ago when its CEO claimed that it was paying off its taxpayer funded loan early. However, as Scott at PowerLine notes, we need the rest of the story:
The [Washington] Times gets comments from Obama administration officials on TARP Inspector General Neil Barofsky’s statement that the funds with which GM paid off its government loan (putting to one side the $50 billioin or so the government has sunk into GM equity and the guarantee it provided to GM’s pension plans) were mostly TARP funds:
General Motors lost $3.4 billion in the fourth quarter of 2009 and is still struggling to reorganize so the company can try to eke out a profit. This grim reality didn’t stop GM from making hay last week for supposedly paying back a $6.7 billion government loan five years ahead of schedule. What was left unsaid was that the automaker used another kitty of taxpayer cash to pay off the earlier government loan. This is an accounting shell game, not progress.
Previously unreleased documents supplied to The Washington Times reveal that GM specifically used funds it received from the Troubled Asset Relief Program to pay off the government loan. According to Neil Barofsky, the special inspector general for TARP, $4.7 billion of $6.7 billion – 70 percent – of what GM paid back came from TARP money the company received. “The one thing a lot of people overlook with this is where they got the money to pay the loan,” Mr. Barofsky told Fox News’ Neil Cavuto on Wednesday. “It isn’t from earnings.” The numbers are based on a quarterly report Mr. Barofsky’s office provided to Congress last week.
This is roughly equivalent of me having two lines of credit with the bank. One of them is for a car loan. The other is a home equity line of credit. I take money out of the home equity line of credit and use it to pay off the car loan, then announce to all of my friends that I’ve paid off my car loan early and we can all go out to celebrate. Did I pay off the loan? Yes. Did I mislead my friends by failing to explain that I’m still indebted just as much as previously? Absolutely.
Now, I understand my example is not entirely parallel, but I don’t think it is that far off.
On a personal level, we are replacing my current get-to-work-and-back automobile. GM and Chrysler did not factor into the discussion of possible replacements–not because they do not have some good vehicles, but because of the advantage which they took of the American taxpayers. While I am not a “Buy America Only” advocate, primarily because it is nearly impossible to encourage the market with such a stance, it is likely that I’ll be buying a Ford. There are a couple of reasons, but one is to say “Thank you for taking care of your business without asking me to bail you out, too.” Are they a perfect company? Far from it. But I can support what they are trying to do.